Gartner Sees Gains for Google in Cloud Office Battle

Google Apps have become a growing threat to Microsoft Office predominance, according to Gartner Inc.

In a Tuesday Webinar, "Choosing a Cloud-Based Office System: Google vs. Microsoft," the analyst and consulting firm offered a somewhat different picture about the competition than in its past presentations. However, this presentation was wrapped in qualifiers. Gartner considered the two productivity suites from the standpoint of being "cloud-based office" applications, where the minimal definition of that phrase included offering e-mail plus text-processor capabilities. Also, the analysis based its assumptions on excluding some growth areas, such as China and India.

Under that narrowed analytical framework, Gartner sees Google's cloud-based productivity suite as having made inroads into Microsoft's market share. In terms of user numbers, Google Apps had about 10 percent of the cloud-office market in 2007, 20 percent in 2009, and between 33 percent and 50 percent in 2012, according to Gartner's analysis.

Those findings appear to be a surprising assessment, even for Gartner. "We didn't anticipate how well Google would do," admitted Tom Austin, vice president at Gartner and a Gartner Fellow, during the Webinar.

Gartner is anticipating that greater office productivity suite growth will occur on the cloud side, rather than the customer premises side, in the near future. In 2013, Gartner expects there will be 630 million office suite business users, with 50 million of them using a cloud-based office. By 2022, there will be 1.2 billion office suite business users, with 695 million of them tapping the cloud.

Microsoft Office currently predominates in terms of on-premises use, with about 80 percent to 96 percent user share, according to Gartner. Some of Microsoft's strengths with Office include meeting business needs and offering a predictable refresh cycle for IT pros. The company also has marketed its cloud-based Office 365 productivity suite along the same lines as its premises-based Office 2013. On top of that, Microsoft offers hybrid deployment options for Office. The productivity suite represents the main chunk of Microsoft's revenue. The single most profitable division at Microsoft is the Business Division, where 80 percent of its revenue comes from Microsoft Office, Austin said.

One of Google's strengths with Google Apps is that its productivity suite has been "cloud focused from the start," according to Austin. Google understands consumerization, ad hoc collaboration and teams. "People who go with Google have a lower fear of change," Austin said. Google has "a huge cash flow," but it doesn't come from Google Apps, which just represented 1.4 percent of the company's fourth-quarter 2012 revenue. More than 90 percent of Google's revenue comes from ad-related sources, he added. Austin claimed that Google has overall better cloud infrastructure than Microsoft at this point. He doesn't see Google pulling out of the productivity suite business as its 1.4 percent Google Apps revenue could grow to five percent in 2017.

Austin said that Google Docs will not become Microsoft Office. Google apps provide "just good enough" capabilities. On the plus side, they aren't bogged down with all of the features in Microsoft Office. Google Apps are oriented toward consumers and "they haven't reconciled in behaving in certain ways for the enterprise," Austin said. Still, the enterprises that have successfully used Google Apps have tended to accept using them on Google's terms, he added.

Google Apps are better suited for heterogeneous environments, while Microsoft Office is "wed to Windows," Austin explained. "Whatever Microsoft does on iOS or Android [with Office] is not going to be world class," he said. Austin noted that Microsoft has been losing market share in the broader operating system platform wars, and added that "we think most organizations will be heterogeneous, so Microsoft's strategy [of Office being tied to Windows] won't be effective in the long run."

In sum, Austin said that Microsoft Office provides the best Windows platform strategy, and that it is less disruptive to IT departments, as well as offering richer functionality to power users. On the other hand, going with Google Apps represents the best heterogeneous strategy, with more innovative products and better cloud-based infrastructure. As for Microsoft Office 365, Austin said that "it's evolutionary" and that "we're not sure Microsoft can beat Google's pace of innovation."

The time for organizations to consider moving to the cloud with productivity suites is 2014 or later, according to Austin. He suggested surveying users in an organization to find out if they have an iPod. "It's a sign they are comfortable with other technologies," he explained. However, organizations that try to avoid risk are more likely to go with Microsoft.

Austin recommended that IT organizations build a plan and review it annually to check the value of cloud-based productivity suites. That effort should include real user pilots using both technologies, as well as assessments from industry peers. He suggested that organizations should consider going heterogeneous and not stick with one vendor, as vendors tend to come and go.